PetroMasila stops diesel distillation amid supply disputes, financial pressure

(MENAFN) On Sunday, PetroMasila, Yemen's state-owned oil exploration and production company, announced the suspension of its diesel distillation unit, a vital facility for supplying power plants in the southeastern province of Hadramaut. This decision, communicated via a letter to both the Yemeni Oil Company and the General Electricity Corporation, was attributed to "force majeure" and complications related to the withdrawal of agreed-upon quantities and subsidized refining values. The company cited the financial burden of covering production, processing, refining, and operating expenses, especially given that most of its inputs are imported and paid for in foreign currency, as a primary reason for the shutdown.

PetroMasila, Yemen's largest oil producer, has been operational since 2011 but has encountered increasing difficulties in recent years. The shutdown comes in the wake of actions by the Hadramaut Tribal Alliance, which has imposed restrictions on diesel sales. These measures include limiting diesel sales to amounts designated for electricity generation and enforcing a price cap of 7,000 riyals (USD 3.5) per 20 liters. This capped price is significantly lower than the market rate, which is approximately 1,400 riyals per liter. The price controls have intensified the financial challenges faced by PetroMasila, complicating its ability to manage operations and meet costs effectively.

The intervention by the Hadramaut Tribal Alliance and the subsequent financial strain have exacerbated the operational difficulties for PetroMasila. The restrictions on diesel sales and the imposition of price controls have created additional challenges in managing the company’s financial stability and operational efficiency. As PetroMasila navigates these issues, the broader implications for energy supply and infrastructure in Hadramaut and Yemen as a whole remain a concern, highlighting the complex interplay between local political actions and the management of critical energy resources.

MENAFN19082024000045015682ID1108575730